Home Prices Dip Again, But Not As Much

The value of the average U.S. home is still going down, but at least it's going down at a slower pace than before.

That was perhaps the most encouraging news found in Zillow.com's second quarter report. The real estate market site found values fell 0.4 percent from the first to the second quarter of 2011, the smallest quarterly decline in more than four years.

The Zillow Home Value Index fell 6.2 percent year-over-year to $171,600. Home values have fallen 28.8 percent since they peaked in June 2006.

Regionally, home values fell on a year-over-year basis in 142 of the 154 metropolitan statistical areas (MSAs) covered by Zillow and were flat in eight others. In the short term, however, nearly two-thirds of MSAs (94 of 154) experienced home value appreciation, with the Zillow Home Value Index rising from the first to the second quarter.

Negative equity is a drag

Negative equity – where owners owe more on their mortgage than the house is worth – continues to be a drag on the market and a stumbling block to sales. Even so, the percentage of U.S. homeowners in a negative equity bind fell slightly to 26.8 percent of single-family homeowners with mortgages in the second quarter, down from 28.4 percent in the first.

Fewer foreclosures were sold in the second quarter. Zillow reports the rate of foreclosure re-sales declined from its peak in March 2011, when 21.4 percent of all sales were foreclosure re-sales. In June, 19.7 percent of sales were foreclosure re-sales.

Many positive signs

"While there are many positive signs in the second quarter, and it is clear the post-tax credit free-fall of home values is over, we're not out of the woods yet," said Zillow Chief Economist Dr. Stan Humphries. "It is very encouraging that two-thirds of markets in our report experienced home value appreciation, but we have to remember that this is coming on the heels of one of the worst quarters since the housing recession began.”

Humphries says the road ahead should be bumpy, with many ups and downs before the housing market rights itself. He said he doesn't expect to see a bottom before 2012 at the earliest.

“There are still hazards in the form of a full foreclosure pipeline, high negative equity and fluctuations in demand," he said.